The Importance of Geographic Access for the Impact of Microfinance

to Grameen-type group lending institutions, using joint liability and a small collateral
requirement with dynamic incentives and disproportionate female participation. Together, CUs
and MCOs occupied a niche between commercial banks and informal money lenders. 6 The
average loan size was USD 2200 for CUs and USD 530 for MCOs, compared to USD 3500 for
commercial bank small loans. These differences are clearly linked to the ability of Credit
Unions to accept deposits, leading them to focus on the economically better off clients who
desire both deposit and lending services (either simultaneously, at varying times in the business
cycle or in the development of their businesses).
Given local regulations, unlike canonical microfinance lending supported by
international donors and utilizing subsidies to reduce poverty and target low-income
households, in Uzbekistan non-bank MFIs targeted economically active households, typically
those above the official poverty line (United Nations Development Program, 2011). Therefore,
different effects on business and consumption outcomes might be expected from those of
canonical microlending.
Several indicators have been used in previous studies to measure geographic access to
finance, including average distance from a household to the nearest branch (or ATM), density
of branches per square kilometre or per capita, and average time necessary for a borrower to
reach an MFI branch (Demirguc-Kunt et al., 2008). We measure geographic access to
microcredit by the distance in kilometres to the nearest non-bank MFI. Transportation barriers
are likely to be particularly severe in Uzbekistan. The population density of 61 per square
kilometre is low. The country has an average of 18 km of roads per every 100 sq km of land
mass (as opposed to a world average of 33) and private auto ownership rates are low (37 per
1000 population). Even in urban areas, transport costs are likely to pose barriers for the poor.
As of 2013, the cost of a monthly transit pass for a pensioner in Tashkent was over 25 per cent
6
Average borrowings from informal sources were at most 50% of those from the smallest type of formal
financial institution.
6